In this article we are going to list the 5 Biggest Stock Scams In Recent Years. For a detailed coverage of this topic and a more comprehensive list, please head on over to the 11 Biggest Stock Scams In Recent Years.
5. Jordan Belfort
If you’ve seen Wolf of Wall Street, you know who Jordan Belfort, and yes, I cannot believe Leonardo Di Caprio didn’t win an Oscar for his performance. Belfort basically engaged in pump and dump schemes in respect of penny stocks, and was finally convicted of securities fraud, though he only spent 22 months in prison for swindling hundreds of millions of dollars, part of which he paid in restitution.
4. Luckin Coffee
Very few of our entries are outside the United States, and perhaps the biggest such example is Luckin Coffee in China. The company was only founded in 2017 in Beijing and in 2020, the number of outlets of the company were even more than that of Starbucks (NASDAQ:SBUX). Later, in 2020, it was revealed that the profits had been inflated by $310 million for the year ending in 2019, and saw the stock price crash massively. Many executives were fired while trading was suspended and the company even ended up being de-listed from the NASDAQ stock exchange. On February 2021, the company had to file for bankruptcy, after admitting that more than a quarter of all business was faked.
3. WorldCom
One of the biggest scandals in the history of the United States took place in 2002, relating to the second largest long distance telephone company in the US. For at least 3 years, the main executives of the company created a scheme which saw them massively inflate earnings to ensure that the stock price of the company would not fall. It was only in 2002, after three years, that the internal audit department head discovered that over $3.8 billion of assets were related to false entries. The company eventually accepted that assets were overstated by $11 billion, which was the biggest such number in history at the time.
2. Enron
The scandal led to the fall of one of the biggest auditing firms in the world as well as one of the biggest energy companies in the United States. While Enron was failing and engaging in failed projects and incurring debts, its accountants used simply engaged in fraud to hide the debt worth billions of dollars, and the CFO was integral in misleading the board as well as pressuring Arthur Anderson, the audit firm and one of the big 5 at the time, to not investigate properly. However, due to the opaque nature of Enron’s disclosures regarding financials, few had the insight to be able to conclusively claim that Enron was engaged in fraud, even as the share price plummeted and the CEO and CFO were ousted. Due to the stock price plummeting and falling confidence, the SEC finally began an investigation, and when all was said and done, both Enron and Arthur Anderson became one of the most infamous examples of big companies failing in the world.
1. Bernie Madoff
Of course, topping the list of the 11 biggest stock scams in recent years is the Madoff Ponzi scheme. Bernie Madoff was one of the most influential people in the finance people in the United States, and operated an investment management company, which was later revealed to be a Ponzi scheme worth tens of billions of dollars. Instead of actually investing the money his clients gave him in stocks and securities, he simply kept the cash in his bank account and showed incredibly inflated, incredibly fake returns. The funny thing is, despite numerous people reaching out to the SEC for at least a decade before the scam was finally made public in 2008, the organization botched every investigation. The truth only came out when Madoff himself admitted this to his sons and received a 150 year sentence.
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